Private Sector Growth Spurs Rise in Construction Spending

The mild temperatures that lasted through the onset of winter contributed to a rise in December construction spending, fueled by the increasing strength of the housing market. The November spending figures were also revised upward, showing slight growth instead of the decline reported last month.

Construction spending rose in December, driven by strong gains in home building and business investment, which outweighed a drop in infrastructure spending by state and local governments.

Construction spending increased 0.9 percent to an annual rate of $885 billion, the Commerce Department said on Friday. Spending on private residential projects increased 2.2 percent in December, a reflection of the nation’s improving housing market, which is expected to help economic growth this year. Residential construction ballooned by 22.3 percent last year. Nonresidential construction, in contrast, grew only 1.2 percent in 2012.

November construction spending was upwardly revised to 0.1 percent growth from an initial read of a drop of 0.3 percent. Public sector construction spending fell 1.4 percent to an annual rate of $270 billion, the lowest level since November 2006.

State and local spending dropped by 1.7 percent, while outlays on federal government projects - a relatively small component of overall construction spending - rose 1.3 percent.